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Verizon's announcement that it will allow customers to choose any app and/or any device on its entire network in 2008 is proof positive that competitive market forces best serve consumers, not rigid net neutrality regulation or legislation.

I see three big takeaways from the Verizon announcement: consumer protection/reliability; market discipline, and more diversity of consumer choice.

The top Senators overseeing Antitrust matters, Senate Antitrust Subcommittee Chairman Herb Kohl (D-WI) and Ranking Republican Member Orrin Hatch (R-UT), wrote a strong letter to the FTC urging serious scrutiny of the Google-DoubleClick merger. (see pasted copy of the letter at the bottom of this post.)

Having testified before their Senate Subcommittee in opposition to the merger September 27th, I was gratified to learn of the subcommitttee's serious bipartisan concern about the merger and also their very strong grasp of the potential anti-competitive issues arising from the merger.

There are three big takeaways from the letter.

First, the Subcommittee defines the relevant market as Internet advertising, "...combining these two companies' leading positions in these two forms of Internet advertising could cause significant harm to competition in the Internet advertising marketplace."

• The subcommittee has adopted the same market definition as opponents of the deal.
• Google had hoped the Subcommittee would, and still hopes the FTC and EU will, define the market as advertising overall.
  • If the FTC agrees with their Senate overseers that the relevant market is the ~$20B Internet advertising market, and not the ~$300B overall advertising market, the merger is at higher risk of disapproval.

Second, the subcommittee has concluded Google has market power in Internet search, another key conclusion of opponents of the merger. 

The WSJ article today: “Google has even bigger plans for mobile phones” appropriately addresses the big “open” question of whether Google is serious about becoming a wireless carrier, because if it is, it will need to bid and win substantial spectrum in the upcoming FCC 700 MHz spectrum auction.

The WSJ article states: “the behind-the-scenes moves illustrate just how serious the Internet giant is about trying to reshape the wireless world.” The evidence in favor of Google’s serious entry into wireless is significant, as Google:

Ironically, just as the EU is gearing up to conduct an "in-depth investigation" of the Google-DoubleClick merger, the FTC investigation is apparently wrapping up with a whimper. What accounts for this divergence in approaches to this merger review?

The first and obvious explanation is differences in the process and timing.

EU antitrust authorities have launched a rare "in-depth investigation" of the Google-DoubleClick merger. What does this action mean? 

First, in calling Google and DoubleClick "the leading providers" respectively of online advertising/intermediation services and ad serving technology, the EU has tipped its hand in its assessment of a central fact in the investigation that it views these two companies as #1 in the world in their specialties. This obviously troubles Google as they have portrayed DoubleClick as a minor player because of its smaller revenue base in the $300m range. The EU obviously did not buy that Google spin.

Second, the EU rejected Google's blanket assertion that "the parties' activities do not overlap" which is Google's fancy way of saying Google and DoubleClick are not competitors. Well the EU pointedly rejected that Google assertion of fact in stating: "The Commisssion will, in particular, investigate whether without this transaction, DoubleClick would have grown into an effective competitor of Google in the market for online ad intermediation." The obvious implication of this statement is that the EU does see Google and DoubleClick as competitors. And it has framed the question in a way that must trouble Google, which is that they are analyzing the merger through the lens of how competition would develop without this merger. hmmm 

The Big Government advocates who try to paint the U.S. as falling behind in broadband so they can justify an activist National Broadband Policy -- have a huge and embarassing hole in their argument -- the U.S. lead in wireless/mobile broadband, including U.S. leadership in transitioning prime analog TV spectrum to mainstream digital broadband use.

• The World Radio Conference of the UN, which is wrapping up this week in Berlin, indirectly showcases this U.S. lead in mobile broadband.
  • Per the International Herald Tribune, the U.S. is way ahead of the rest of the world in transitioning analog broadcasters to digital and reallocating this best-available spectrum for mobile-broadband use --
    • IHT: "The world is in varying stages in going digital, with U.S. broadcasters switching by 2009, Asian broadcasters by 2015, and most European countries somewhere in between." 
  • So how does being 2-6 years ahead of our international competitors in bringing the best available spectrum for mobile broadband to consumers -- constitute "falling behind" or "a failure of no national broadband policy?"

This U.S. world leadership in transitioning prime spectrum to optimal consumer use is powerful evidence of the superiority of our broadband policy approach, which embraces market forces more than just about any other major country in the world.

I most highly commend George Ou and Richard Bennett for bringing some much-needed adult supervision and technical excellence to the issue of Comcast's network management. Please read George's latest blogpost.

• FreePress...read it and weep -- you have laid another high profile net neutrality egg.

George has produced the must read piece on this issue. In "A rational debate on Comcast's Traffic management" George explains, with the assistance of Richard Bennett's exceptional expertise, what is really going on with Comcast's traffic management. 

• In a nutshell, they explain the real world design limitations of a shared cable network, especially on the upstream path, and how those limitations practically require network managers to limit how much traffic goes through a particular network point, just like traffic lights must do on highway ramps during rush hour to ensure that the highway does not degrade into a parking lot. 

The already low credibility of net neutrality proponents will fall even further as the FCC investigates this allegation and determines Comcast's network management to be well within the bounds of "reasonable." 

• While net neutrality proponents and their activist reporter friends may like to play engineers on TV, noone would want to entrust them with operating anything more complicated than a mouse.   

The reason we have due process in this country is precisely to protect against this type of spurious allegation.

The American Antitrust Institute, an independent non-profit advocacy organization just released its white paper:

• "Google Acquisition of DoubleClick: Antitrust Implications" in which it urges the FTC to block the Google-DoubleClick merger as anti-competitive.

Like my Googleopoly analysis from this July and my Senate Judiciary Subcommittee testimony in October, the aai concludes that Google and DoubleClick are indeed direct competitors and that: "the merger presents a relatively straightforward case for challenge under the horizontal and non-horizontal merger guidelines."

• Moreover, the aai stated: "We also see a risk of significant foreclosure effects from Google's control over DoubleClick's publisher and advertiser tools and integration of those tools with Google's dominant search engine and contextual advertising network."

Bottom line: This merger obviously raises serious anti-competitive issues and I continue to believe it should be blocked, but that does not mean that I still think it will be blocked by the FTC -- I no longer do.

In addition to delivering another spectacular quarter of revenue growth, Google provided some new and current information that is highly relevant to the FTC and EU review.

First, compelling evidence of Google's market power is mounting.

I normally consider myself a big fan of Walter Mossberg's technology reviews in the Wall Street Journal, but for today I am a big critic of Mr. Mossberg's woefully uniformed and one-sided opinion piece on public policy "Free my Phone."

Obviously frustrated at the technical reality that the bandwidth availability of telecommunications devices has not kept pace with the faster growth in computer processing, Mr. Mossberg lashes out at public policy as the cause in an emotional diatribe that illogically concludes that "if the government...breaks the crippling power that the wireless carriers exert today, the free market will deliver a... happy ending."